On May 15, 2020, the Small Business Administration (the “SBA”) issued the form of application (the “Application”), a copy of which can be found by clicking here, that borrowers will be required to submit when seeking loan forgiveness under the Paycheck Protection Program (“PPP”). Although the Application does not answer all of the relevant questions regarding loan forgiveness, it clarifies a number of critical points. A summary of these provisions are provided below. Please note, however, that (a) the SBA intends to issue additional guidance on loan forgiveness in the form of an Interim Final Rule, and (b) Congress is considering additional changes to the PPP affecting loan forgiveness. As a result, the details of potential loan forgiveness are likely to change.

Click here to download the guide.

Question	Clarification
When does the 8 week period begin for determining “payroll costs”?	The 8 week period for determining eligible payroll costs begins, at a qualifying borrower’s election, either on (i) the date the PPP loan is disbursed (“Covered Period”) or (ii) the first day of the borrower’s first payroll period following the day of the PPP loan disbursement (the “Alternative Period”). The SBA has provided certain borrowers with administrative flexibility to ensure covered payroll costs are eligible for loan forgiveness. Specifically, the Application provides that “[b]orrowers with a biweekly (or more frequent) payroll schedule may elect to calculate eligible payroll costs using the eight-week (56 day) period that begins on the first day of their first pay period following their PPP loan disbursement.” As an example, the SBA indicated that if the borrower received its PPP loan proceeds on Monday, April 20, and the first day of its first pay period following its PPP loan disbursement was Sunday, April 26, the first day of the Alternative Period was April 26 and the last day of the Alternative Period would be Saturday, June 20. This Alternative Period option, according to the Application, is not available for borrowers with a semi-monthly or monthly payroll schedule.
When are payroll costs deemed to have been “incurred” and “paid”?	Pursuant to the CARES Act, a borrower is eligible for an amount of forgiveness equal to amounts “incurred and payments made” on covered costs (payroll costs, rent, utilities, etc.) during the 8 week period after the PPP loan disbursement. This statutory provision, however, does not explain when a payment or obligation is deemed to be “incurred” under the PPP. The SBA has clarified that payroll costs are deemed to be “incurred” on the date that the employee’s pay is earned. Payroll costs are deemed to be “paid” on the day that paychecks are distributed or the borrower originates an Automated Clearing House (ACH) credit transaction. To ensure that a borrower is able to potentially obtain maximum forgiveness, payroll costs incurred but not paid during the borrower’s last payroll of the Covered Period or Alternative Period, as applicable, are eligible for forgiveness if paid on or before the next regular payroll date.
How is the limit on employee cash compensation in excess of $100,000 calculated?	Under the CARES Act, payroll costs exclude the amount of an employee’s compensation in excess of an annual salary of $100,000, as prorated for the applicable period. The SBA previously determined that this $100,000 limitation “applies only to cash compensation, not to non-cash benefits” includible as payroll costs, such as health and retirement plan contributions made on behalf of employees. As set forth in the instructions to the Application, the SBA has clarified that borrowers are to cap cash compensation eligible for forgiveness at $15,385 (the 8 week equivalent of $100,000 per year) for each employee. However, the compensation for owner-employees, self-employed individuals and general partners of businesses is limited to the lesser of $15,385 or the 8 week equivalent of their applicable compensation in 2019. The prior guidance excluding from payroll costs health and retirement plan contributions made on behalf of such individuals remains unchanged.
Has the SBA provided additional information on what cash compensation is included in payroll costs?	Yes. The Instructions to Schedule A to the Application define “cash compensation” to include “the sum of gross salary, gross wages, gross tips, gross commissions, paid leave (vacation, family, medical or sick leave, not including leave covered by the Families First Coronavirus Response Act), and allowances for dismissal or separation paid or incurred during the Covered Period or the [Alternative Period].” Although the Application does not specifically address bonuses or premium pay, in general, “gross wages” refers to all taxable wages, including bonuses and premium pay. As a result, absent further guidance to the contrary, premium pay and bonuses appear to be a permissible use of PPP loan proceeds and, thus, eligible for loan forgiveness, subject to the limitation on cash compensation in excess of $100,000 on an annualized basis as discussed above.
Has the SBA provided additional information on the non-cash components of payroll costs?	Yes. The Instructions to Schedule A to the Application confirm that the following costs are considered eligible payroll costs: Employer contributions for employee health insurance, including employer contributions to a self-insured, employer-sponsored group health plan, but excluding any pre-tax or after-tax contributions by employees. Employer contributions to employee retirement plans on behalf of employees, but excluding any pre-tax or after-tax contributions by employees. Employer state and local taxes assessed on employee compensation, but excluding any taxes withheld from employee earnings.
Has the SBA provided clarity on whether covered mortgage obligations and covered rent obligations include mortgages and leases relating to personal property?	Yes. Pursuant to the CARES Act and the existing guidance issued by the SBA, the following costs are “permissible” uses of PPP loan proceeds: (i) payroll costs; (ii) covered mortgage obligations interest only) incurred before February 15, 2020; (iii) covered rent obligations under leases dated before February 15, 2020; (iv) utility payments under service agreements dated before February 15, 2020; and (v) interest on any other debt obligations that were incurred before February 15, 2020. Only the costs set forth in items (i)–(iv) are subject to loan forgiveness. The costs set forth in items (ii)–(iv) are referred to as the “eligible non-payroll costs”. The Application clarifies that, in addition to real property obligations, borrowers may use PPP loan proceeds to pay interest on mortgage obligations, as well as rent and lease obligations relating to personal property, and such costs are subject to loan forgiveness. We note that borrowers are still required to use at least 75% of the PPP loan proceeds on eligible payroll costs and up to 25% on eligible non-payroll costs, including covered mortgage and rent obligations, to be eligible for maximum loan full forgiveness.
What happens if a borrower’s eligible non-payroll costs are incurred during the Covered Period, but are required to be paid after the Covered Period ends?	Similar to the SBA’s treatment of payroll costs, eligible non-payroll costs that are either paid during the Covered Period or “incurred” during the Covered Period and paid on or before the next regular billing date, even if the billing date is after the Covered Period, are eligible for loan forgiveness. Please note, however, that the relevant period for determining eligible non-payroll costs is the Covered Period, as the Alternative Period only applies to determining payroll costs. Meaning, qualifying non-payroll costs must be paid or incurred within 8 weeks of loan disbursement to be eligible for forgiveness.
How are FTEs calculated for purposes of the FTE headcount reduction calculation?	The Application clarifies that average full-time equivalent (“FTE”) employee headcount during the Covered Period or the Alternative Period, is calculated as follows: for each employee, the borrower is required to divide the average number of hours paid per week by 40, and round the total to the nearest tenth (the maximum for each employee is capped at 1.0); or a simplified method that assigns a 1.0 for employees who work 40 hours or more per week and 0.5 for employees who work fewer hours may be used at the election of the borrower.
What if a borrower’s employees refused to return to work, resigned or were terminated? Are they still to be counted in the FTE employee headcount reduction calculation?	No. The Application makes clear that a borrower may exclude the following employees for purposes of the FTE reduction calculation: employees to whom the borrower made a good-faith, written offer to rehire during the Covered Period or the Alternative Period which was rejected by the employee; and employees who, during the Covered Period or the Alternative Period, (a) were fired for cause, (b) voluntarily resigned, or (c) voluntarily requested and received a reduction of their hours. Any FTE reductions in these cases do not reduce the borrower’s loan forgiveness.
What type of payroll and eligible non-payroll documentation is a borrower required to submit with its Application?	The types of payroll documentation that a borrower is required to submit with its Application are listed below. Bank account statements or third-party payroll service provider reports documenting the amount of cash compensation paid to employees. Tax forms (or equivalent third-party payroll service provider reports) for the periods that overlap with the Covered Period or the Alternative Period, such as: (i) payroll tax filings reported, or that will be reported, to the IRS (typically, Form 941); and (ii) state quarterly business and individual employee wage reporting and unemployment insurance tax filings reported, or that will be reported, to the relevant state. Payment receipts, cancelled checks or account statements documenting the amount of any employer contributions to employee health insurance and retirement plans that the borrower included in the forgiveness amount. In addition, a borrower will be required to submit with its Application the following documentation for all eligible non-payroll costs. Eligible Non-Payroll Costs. Documentation verifying the existence of the obligations/services prior to February 15, 2020 (e.g., loan agreements, rent/lease agreements and service agreements). Covered Mortgage Obligations. A copy of lender amortization schedule and receipts or cancelled checks verifying eligible payments from the Covered Period or lender account statements from February 2020 and the months of the Covered Period through one month after the end of the Covered Period verifying interest amounts and eligible payments. Covered Rent Obligations. A copy of current lease agreement and receipts or cancelled checks verifying eligible payments from the Covered Period or lessor account statements from February 2020 and from the Covered Period through one month after the end of the Covered Period verifying eligible payments. Covered Utility Payments. A copy of invoices from February 2020 and those paid during the Covered Period and receipts, cancelled checks or account statements verifying those eligible payments.
What types of FTE documentation is a borrower required to submit with its Application?	Borrowers’ Applications must include documentation evidencing the average number of FTE employees on payroll per month employed by the borrower for one of the following periods, as determined by the borrower: (i) February 15, 2019 to June 30, 2019 or (ii) January 1, 2020 to February 29, 2020. In the case of a seasonal employer, the borrower must submit documentation evidencing the average number of FTE employees on payroll per month employed by the borrower for one of the following periods, as determined by the borrower: (i) February 15, 2019 to June 30, 2019; (ii) January 1, 2020 to February 29, 2020; or (iii) any consecutive 12 week period between May 1, 2019 and September 15, 2019. The Application provides that such documentation may include payroll tax filings reported, or that will be reported, to the IRS (typically, Form 941) and state quarterly business and individual employee wage reporting and unemployment insurance tax filings reported, or that will be reported, to the relevant state.
What type of documentation is the borrower required to retain, but which is not required to be submitted with its Application?	For six years after the date the PPP loan is forgiven or repaid in full, borrowers are required to retain the below documentation. Schedule A Worksheet or its equivalent. Documentation supporting the listing of each individual employee in Schedule A – Table 1 to the Application, including the “Salary/Hourly Wage Reduction” calculation, if necessary. Documentation supporting the listing of each individual employee in Schedule A – Table 2 of the Application; specifically, that each listed employee received during any single pay period in 2019 compensation at an annualized rate of more than $100,000. Documentation regarding any employee job offers and refusals, firings for cause, voluntary resignations and written requests by any employee for reductions in work schedule. Documentation supporting the Schedule A section “FTE Reduction Safe Harbor,” if applicable. All records relating to the borrower’s PPP loan including, but not limited to, the following: (a) documentation submitted with its PPP loan application; (b) documentation supporting the borrower’s certifications as to the necessity of the loan request and its eligibility for a PPP loan; (c) documentation necessary to support the borrower’s loan forgiveness application; and (d) documentation demonstrating the borrower’s material compliance with PPP requirements. Borrowers are expected to “permit authorized representatives of SBA, including representatives of its Office of Inspector General, to access such files upon request.”
Is there any clarification regarding audits of borrowers who obtained a PPP loan in an amount in excess of $2 million?	No. If a borrower, along with all of its affiliates, received a PPP loan in excess of $2 million, the borrower is required to acknowledge the fact in a check-the-box manner. At this time, the SBA has issued no guidance that outlines how it will “audit” relevant borrowers.
Is the borrower required to make any new or additional certifications in submitting the Application?	Yes. The borrower is required to make a variety of certifications in submitting the Application, including but not limited to the following: Certification that the dollar amount for which forgiveness is requested was used to pay costs that are eligible for forgiveness and that, if the funds were knowingly used for unauthorized purposes or the borrower knowingly makes a false statement to obtain forgiveness, the federal government may pursue recovery of loan amounts and/or civil or criminal fraud charges. Certification to its understanding and agreement that the SBA may request additional information for the purposes of evaluating the borrower’s eligibility for both (i) the PPP loan and (ii) loan forgiveness. Acknowledgement that if it fails to provide information requested by the SBA, it may result in a determination that the borrower was ineligible for the PPP loan or a denial of the borrower’s loan forgiveness application.

Vedder Price is pleased to announce that a number of our attorneys and practice groups have been ranked by Chambers USA in 2020, including a nationwide Band 1 firm ranking for Transportation: Aviation Finance, the guide’s highest honor for the tenth year in a row.

Practice Group Rankings

Band 1

• Transportation: Aviation: Finance (Nationwide)

Band 2

• Media & Entertainment: Litigation (Illinois)
• Labor & Employment: Employee Benefits & Compensation (Illinois)
• Transportation: Shipping/Maritime: Finance (Nationwide)

Band 3

• Banking & Finance (Illinois)

Band 4

• Bankruptcy/Restructuring (Illinois)
• Investment Funds: Registered Funds (Nationwide)
• Labor & Employment (Illinois)
• Litigation: White-Collar Crime & Government Investigations (Illinois)

Band 5

• Corporate/M&A & Private Equity (Illinois)

 

Attorney Rankings

Band 1

• Ronald Scheinberg – Transportation: Aviation: Finance (Nationwide)
• Jeffrey T. Veber – Transportation: Aviation: Finance (Nationwide)

Band 2

• Thomas P. Desmond – Labor & Employment: Employee Benefits & Compensation (Illinois)
• Douglas J. Lipke – Bankruptcy/Restructuring (Illinois)
• Geoffrey R. Kass – Transportation: Aviation: Finance (Nationwide)
• Blaine C. Kimrey – Media & Entertainment: Litigation (Illinois)
• Francis X. Nolan, III – Transportation: Shipping/Maritime: Finance (Nationwide)
• Cathy Gonzales O’Kelly – Investment Funds: Registered Funds (Nationwide)
• Junaid A. Zubairi – Litigation: White-Collar Crime & Government Investigations (Illinois)

Band 3

• Adam R. Beringer – Transportation: Aviation: Finance (Nationwide)
• John E. Bradley – Transportation: Shipping/Maritime: Finance (Nationwide)
• Bradley C. Crawford – Banking & Finance (California)
• Michael M. Eidelman – Bankruptcy: Restructuring (Illinois)
• Ryan S. Hedges – Litigation: White-Collar Crime & Government Investigations (Illinois)
• Michael A. Nemeroff – Corporate/M&A (Illinois)
• Kelly A. Starr – Labor & Employment: Employee Benefits & Compensation (Illinois)

Band 4

• Kevin P. Connelly – Government: Government Contracts (Nationwide)
• Thomas G. Hancuch – Labor & Employment: Employee Benefits & Compensation (Illinois)
• Renee M. Hardt – Investment Funds: Registered Funds (Nationwide)
• Kenneth F. Sparks – Labor & Employment (Illinois)
• Thomas M. Wilde – Labor & Employment (Illinois)

Senior Statespeople

• Robert J. Stucker – Labor & Employment: Employee Benefits & Compensation (Illinois)

Associates to Watch

• Bryan K. Clark – Media & Entertainment: Litigation (Illinois)
• Jason P. Faust – Labor & Employment: Employee Benefits & Compensation (Illinois)

Chambers & Partners is a notable resource for the legal profession and has built a reputation for in-depth, objective research. Chambers conducts thousands of interviews with lawyers and their clients worldwide to identify and rank the world’s best lawyers according to the criteria most valued by clients, such as technical knowledge, business acumen, prompt delivery and value. On the basis of this research, Chambers ranks both firms and individual attorneys around the world.

Click here for the firm’s full Chambers & Partners profile.

Vedder Price is pleased to announce that its Global Transportation Finance team, led by London Partner Neil Poland, represented Standard Chartered on its US$850 million secured financing with Qatar Airways in respect of seven Boeing 787-9 aircraft. Financial closing occurred on 16 April 2020.

“We are pleased to have partnered with Standard Chartered Bank on this financing during such a unique time for the airline industry as a result of the COVID-19 pandemic,” said Mr. Poland. “This transaction demonstrates the efforts financial institutions have displayed in supporting the airline sector and airline liquidity, and we are glad to have played a part in Standard Chartered Bank’s continued support of Qatar Airways.”

The Vedder Price team also included Kaiden Basi (English law), and Jeff Veber and Nicole Chong (New York law).

Vedder Price is pleased to announce that a number of our attorneys and practice groups have been ranked by Chambers USA in 2020, including a nationwide Band 1 firm ranking for Transportation: Aviation Finance, the guide’s highest honor for the tenth year in a row.

Practice Group Rankings

Band 1

• Transportation: Aviation: Finance (Nationwide)

Band 2

• Media & Entertainment: Litigation (Illinois)
• Labor & Employment: Employee Benefits & Compensation (Illinois)
• Transportation: Shipping/Maritime: Finance (Nationwide)

Band 3

• Banking & Finance (Illinois)

Band 4

• Bankruptcy/Restructuring (Illinois)
• Investment Funds: Registered Funds (Nationwide)
• Labor & Employment (Illinois)
• Litigation: White-Collar Crime & Government Investigations (Illinois)

Band 5

• Corporate/M&A & Private Equity (Illinois)

 

Attorney Rankings

Band 1

• Ronald Scheinberg – Transportation: Aviation: Finance (Nationwide)
• Jeffrey T. Veber – Transportation: Aviation: Finance (Nationwide)

Band 2

• Thomas P. Desmond – Labor & Employment: Employee Benefits & Compensation (Illinois)
• Douglas J. Lipke – Bankruptcy/Restructuring (Illinois)
• Geoffrey R. Kass – Transportation: Aviation: Finance (Nationwide)
• Blaine C. Kimrey – Media & Entertainment: Litigation (Illinois)
• Francis X. Nolan, III – Transportation: Shipping/Maritime: Finance (Nationwide)
• Cathy Gonzales O’Kelly – Investment Funds: Registered Funds (Nationwide)
• Junaid A. Zubairi – Litigation: White-Collar Crime & Government Investigations (Illinois)

Band 3

• Adam R. Beringer – Transportation: Aviation: Finance (Nationwide)
• John E. Bradley – Transportation: Shipping/Maritime: Finance (Nationwide)
• Bradley C. Crawford – Banking & Finance (California)
• Michael M. Eidelman – Bankruptcy: Restructuring (Illinois)
• Ryan S. Hedges – Litigation: White-Collar Crime & Government Investigations (Illinois)
• Michael A. Nemeroff – Corporate/M&A (Illinois)
• Kelly A. Starr – Labor & Employment: Employee Benefits & Compensation (Illinois)

Band 4

• Kevin P. Connelly – Government: Government Contracts (Nationwide)
• Thomas G. Hancuch – Labor & Employment: Employee Benefits & Compensation (Illinois)
• Renee M. Hardt – Investment Funds: Registered Funds (Nationwide)
• Kenneth F. Sparks – Labor & Employment (Illinois)
• Thomas M. Wilde – Labor & Employment (Illinois)

Senior Statespeople

• Robert J. Stucker – Labor & Employment: Employee Benefits & Compensation (Illinois)

Associates to Watch

• Bryan K. Clark – Media & Entertainment: Litigation (Illinois)
• Jason P. Faust – Labor & Employment: Employee Benefits & Compensation (Illinois)

Chambers & Partners is a notable resource for the legal profession and has built a reputation for in-depth, objective research. Chambers conducts thousands of interviews with lawyers and their clients worldwide to identify and rank the world’s best lawyers according to the criteria most valued by clients, such as technical knowledge, business acumen, prompt delivery and value. On the basis of this research, Chambers ranks both firms and individual attorneys around the world.

Click here for the firm’s full Chambers & Partners profile.

With states beginning to ease stay-at-home orders, employers are formulating plans to return employees to the workplace. As part of this process, many employers are considering implementing regular employee temperature checks in an effort to keep employees safe. While this measure may have seemed unthinkable and fraught with risks even just a couple of months ago, we expect that health screenings, including temperature checks, will become increasingly prevalent in the workplace. In fact, just last week, the Centers for Disease Control and Prevention (“CDC”) issued guidance on how employers and businesses can safely conduct temperature checks. Key portions of that guidance are summarized below, along with a list of common questions and best practices employers should consider before requiring employees to undergo regular temperature checks.

1. Are employers required to screen employees’ temperatures before they enter the workplace?

The answer depends on the state(s) in which the employer operates.  Some states are now requiring employers to conduct regular temperature checks on employees.  For example, Colorado requires certain critical and noncritical businesses to conduct daily temperature checks and monitor employees’ symptoms, and employers with 50 or more employees at one location must implement stations for symptom screenings and temperature checks.  Other states such as Indiana require all employers to implement a COVID-19 response plan, which includes implementing a health screening process for employees that may include regular temperature checks.  Additionally, employers may be subject to different temperature check requirements based on industry.  For example, Washington requires construction contractors to screen all workers at the beginning of their shift by taking their temperature and asking them if they have symptoms.  Any worker found to have a temperature of 100.4 degrees or higher must be sent home.  That said, many states currently have no temperature check mandate, including–for now–Illinois (with limited exceptions such as certain health care and long-term care employees), giving many employers some flexibility to determine how best to screen employees for symptoms, if at all.  Employers should consult and keep a close eye on ever-changing state and local guidelines to determine if and when temperature checks are required.

2. Even if there is no state or local mandate, can employers still require employees to submit to routine on-site temperature checks as a condition of employment?

Yes, provided that temperature checks are administered safely, consistently and in a non-discriminatory manner.  The Equal Employment Opportunity Commission (“EEOC”) has issued guidance confirming that temperature checks are a permissible screening mechanism to use during the COVID-19 pandemic. However, to avoid discrimination claims, employers generally should not pick and choose who is subject to temperature screening unless it is part of a nondiscriminatory plan (e.g., screening only that portion of the workforce where social distancing measures may not be feasible, such as warehouses or manufacturing plants).  Note that if employers choose to screen every employee entering a facility, employers may need to conduct such checks on anyone entering the workplace–not just employees–to minimize the risk of discrimination claims and to reduce the risk of transmission. 

3. What are the key CDC guidelines for conducting on-site temperature screenings?

The CDC outlines two options for on-site screenings. The first approach relies on barrier/partition controls and personal protective equipment (“PPE”) and the second approach relies exclusively on PPE.

Under the first approach, the screener stands behind a physical barrier, such as a glass or plastic window or partition.  Using disposable gloves, the screener checks the employee’s temperature by reaching around the partition or through the window.  It is critical that the screener’s face remain behind the barrier at all times during the screening.

Under the second approach, the screener uses a face mask, eye protection (goggles or disposable face shield that fully covers the front and sides of the face), disposable gloves and a gown (if physical contact with an employee is anticipated) when taking employees’ temperatures.

When conducting temperature checks on multiple employees, the screener should use a clean pair of gloves for each employee and ensure that the thermometer is thoroughly cleaned after each use.  If the screener is using a disposable or non-contact thermometer (i.e., non-contact infrared thermometers, tympanic thermometers, and thermal scanners) and he or she does not make physical contact with the employee, then the CDC states that the screener need not change his or her gloves after each check.

Under either approach, the CDC confirms that employees found to have a temperature of 100.4 degrees or higher should be sent home immediately and instructed to promptly contact their doctor.  Employers should follow up with employees who are sent home with additional information about any available benefits and return-to-work protocol.  The CDC further recommends that employees maintain social distancing when waiting for their turn to be screened, and to the extent possible, screening should take place before an employee enters the physical workplace.

The CDC guidance can be found here:  https://www.cdc.gov/coronavirus/2019-ncov/community/general-business-faq.html

4. How should the temperature screeners be selected and trained?

An obvious first choice for a screener is often a medical officer or nurse, if such an employee is available and on staff.  If not, employers should carefully select an appropriate screener, ensure that the individual is comfortable with the role, and consider providing such individual with additional compensation or hazard pay.  Alternatively, there are third-party vendors who now offer these types of services, though such vendors should be carefully vetted.  Finally, employers are even turning to robots or robotic arms to conduct screens in order to reduce the risk of exposure during the screening process.

No matter who is selected, screeners should be trained on how to safely complete temperature screens, the proper use and disposal of PPE, and maintaining employee privacy.  As a best practice, we recommend that employers retain a medical professional to train screeners on how to safely and effectively conduct a temperature check, or at a minimum, employers should consult a medical professional to provide and confirm such information.  We also recommend that screeners sign a document establishing the protocol, requiring confidentiality of employee medical information, and confirming that the individual has been informed of and consents to the risks of serving as a screener.

5. What kind of thermometer should be used?

As a practical matter, we strongly advise that employers use a disposable or no-contact thermometer to prevent the spread of the virus. In fact, without a disposable or contactless device, employers may want to consider abandoning temperature checks altogether (if doing so will not run afoul of state or local law) and instead rely on other screening measures.  The risk of inadvertently using a contaminated device may outweigh any potential benefits gained from implementing a screening protocol in the first place.

However, if an employer uses a sophisticated device, including robots, to screen employees’ temperatures, Illinois employers should be aware of yet another potential legal pitfall.  Some devices and robots rely on artificial intelligence, including in some cases, facial recognition capabilities.  Such equipment could implicate the Illinois Biometric Information Privacy Act (“BIPA”), which has strict notice, disclosure and consent requirements.  Employers should discuss these risks with counsel before using any such devices.

6. If employees are required to undergo a temperature screening before clocking into work, must the employer compensate them for that time?

In most cases, yes.  While the answer to this question may depend, in part, on state law, we generally recommend that employers compensate employees for any time spent waiting to be screened and participating in the screening process in order to comply with the Fair Labor Standards Act (“FLSA”) and state wage and hour laws.  Running afoul of these laws by not paying employees for otherwise compensable pre-shift activities can be much more costly in the long run than paying employees for the time spent in the screening process itself.

7. What are the privacy concerns related to temperature checks?

The Americans with Disabilities Act (“ADA”) requires employers to maintain the confidentiality of all information obtained through disability-related inquiries and medical examinations.  Temperature screening is a medical examination under the ADA. Accordingly, any information collected as part of the screening process must be treated as a confidential medical record and maintained separately from the employee’s personnel file.  It may be disclosed only in limited circumstances. Employers should also consider how to best protect the privacy of those employees who are found to have an elevated temperature and need to be sent home (e.g., allowing for an inconspicuous exit, private screening, drive-through screening, etc.). 

8. What if an employee refuses to participate in on-site temperature checks?

As a general matter, employees can be required to undergo temperature checks as a condition of employment, and those who refuse to do so should be sent home.  Employers should communicate the requirements for temperature checks and the consequences for failing to cooperate in a clearly written notice or policy that is distributed to all employees in advance of the implementation of the screening protocol.  Employees who refuse to adhere to those requirements may be disciplined, provided that any such discipline is administered in a consistent and nondiscriminatory manner.  However, for a variety of reasons (including employee morale), employers should consider whether discipline is truly necessary.  The better option may be to simply send the employee home or deny them access to the workplace.  When in doubt, employers should consult counsel before implementing discipline. 

9. Is fever alone a reliable indicator of COVID-19?

According to the medical community, no.  Unfortunately, an elevated temperature is not a definitive indicator of the illness, and an employee may be contagious even without a fever. For that reason, and as discussed further below, employers should consider implementing other screening mechanisms either in lieu of on-site temperature screening (if allowed under applicable law) or in addition to temperature screening.

10. If fever is not a reliable indicator of COVID-19, why are employers implementing temperature screening?

Employers are looking for concrete steps they can take to reduce the risk of exposure in the workplace.  Unlike most COVID-19 symptoms, body temperature can be objectively screened and verified.  While temperature screening will not effectively identify asymptomatic cases, it still has the ability to catch positive cases and help prevent a potential outbreak in the workplace.  In many instances, employers are implementing temperature screening in an attempt to alleviate employee anxiety.  Some employers are reporting that employees actually want to have temperature checks in place to know that their employer is taking meaningful, proactive steps to keep them safe.  In other words, temperature screening may be as much of an employee relations (and public relations) tool as it is a prevention mechanism. In weighing the decision to implement on-site screening, employers should consider whether employees will be comforted by the process of temperature checks or if it will instead stoke fear and panic.

11. How should employees be notified of on-site screening measures?

We recommend that employers provide employees with advance, written notice of temperature checks and any other screening measures.  The notice or policy statement should explain the basis and method for conducting the screening, the steps the employer is taking to protect employee safety and privacy, and the consequences for failing to comply.  To avoid a false sense of security, the notice should also make clear that just because someone does not have a fever does not necessarily mean that the person does not have the virus.  The notice should explain that many people who test positive for COVID-19 are asymptomatic, and that employees should continue to take appropriate precautions and self-monitor and report to the employer the presence of any other symptoms.

12. What are the alternatives to on-site temperature screening?

As discussed above, on-site temperature screening presents potential logistical and legal issues that may steer some employers away from taking such measures.  As an alternative to on-site temperature screening, many employers are instead considering and implementing some type of employee self-assessment or self-monitoring protocol.  This can be accomplished through completion of daily self-assessment and/or certification forms in which the employee is asked to self-report temperature, other symptoms, or potential exposure events.  Other employers are relying on a one-time policy document whereby employees acknowledge and agree that by reporting to work each day, they are certifying that they have no symptoms.  Some employers are even incorporating the daily certification into timekeeping software (without disclosing medical information).

According to the CDC, it is reasonable to ask employees to take their own temperature before arriving to work.  This helps reduce the risk that those who are experiencing symptoms of COVID-19 will expose others to the virus by traveling to or reporting to work.  Therefore, some employers may opt to have employees conduct their own temperature checks before arriving at work, which alleviates some of the logistical and legal concerns.  However, note that employers in some states, like California and Illinois, may need to foot the bill for supplying employees with thermometers needed to complete any such self-assessment.

Regardless of the approach taken, we believe that employers should implement some type of symptom screening mechanism, even if it is not an on-site temperature check. And if an employer does decide to conduct on-site temperature screening (or is required to do so by law), we believe temperature checks should be used in conjunction with other screening efforts such as requiring employees to identify other symptoms or potential exposure incidents.  In other words, temperature screening should be just one of many potential tools in the employer’s arsenal to combat COVID-19 in the workplace. 

For assistance in preparing your return-to-work protocol or for implementing a thoughtful and compliant screening procedure, please contact Cara J. Ottenweller at +1 (312) 609 7735, Michelle T. Olson at +1 (312) 609 7569 or any Vedder Price attorney with whom you have worked.

The Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, was signed into law by President Trump on March 27, 2020. One of the key economic aid provisions for businesses contained in the Act was the Paycheck Protection Program (“PPP”), which authorized up to $349 billion in forgivable loans to small businesses to pay employee wages and certain other expenses during the economic crisis resulting from the COVID-19 pandemic. By April 16th, all $349 billion of PPP funds had been fully deployed. On April 24th, the President signed into law legislation providing an additional $310 billion in funding to replenish the Small Business Administration’s PPP funds.

One feature that has made PPP loans so attractive to small businesses was that the CARES Act allowed PPP loans to be forgiven, if certain conditions were met, and such forgiveness would not be included in the borrower’s gross income. Loan forgiveness was available for loan proceeds that were used during an eight-week period beginning on the date of the origination of the loan to make wage payments, certain mortgage interest and rent payments, and payments of utility expenses (“eligible PPP loan expenses”). Typically, such expenses would be deductible by a taxpayer for federal income tax purposes.

Although the CARES Act specified that PPP loan forgiveness would not result in the borrower having to include the forgiven amounts in gross income, the Act was silent on the issue of whether the expenses paid with PPP loan proceeds that are subsequently forgiven would be impacted by the potential tax-free nature of the PPP loan.

The IRS has now addressed this issue, and despite the seeming intent of the CARES Act, the IRS announced in Notice 2020-32 that no deduction is allowed for an expense that is otherwise deductible if payment of the expense results in forgiveness of a PPP loan. The IRS position is based on section 265 of the Internal Revenue Code, which provides that no deduction is allowed for amounts otherwise allowable as a deduction if it is allocable to income that is exempt from tax. The rationale behind section 265 is that permitting such deductions would effectively let taxpayers “double dip” on federal income tax benefits, receiving a tax deduction for payments made with income that was not taxable to them. Notice 2020-32 deems an expense to be allocable to tax-exempt income, and thus disallowed as a deduction under section 265, if the expense is “for the amount of any payment of an [eligible PPP loan expense] to the extent of the resulting covered loan forgiveness (up to the aggregate amount forgiven).”

Receiving a PPP loan is still a valuable benefit to borrowers, but the IRS position significantly reduces the tax benefit to taxpayers since the loss of the associated deduction for wage, mortgage interest, rent or utility payments may not be different (and may actually be worse on a time value of money basis) than the effect of having cancellation of indebtedness income from the forgiveness of the PPP loan.

Shortly after the IRS issued Notice 2020-32, several members of Congress expressed their disappointment with the IRS position; but on May 4, 2020, Secretary of the Treasury Steven Mnuchin defended the position taken in Notice 2020-32 explaining that taxpayers should not be allowed to “double dip” by deducting expenses funded by loans that are forgiven without tax consequence. In response, on May 5, 2020, a bipartisan group of Senators introduced the Small Business Expense Protection Act of 2020 (S. 3612), which, if enacted, would retroactively override the holding in Notice 2020-32 and provide that expenses funded by forgiven PPP loans remain deductible as ordinary business expenses. Until that bill or similar legislation is enacted, however, PPP borrowers will have to plan for the possible loss of deductions associated with the forgiveness of their PPP loans.

If you have any questions regarding the topics discussed in this article, please contact Daniel T. Sherlock, Chair of Vedder Price’s Tax & Estate Planning Group, at +1 (312) 609 7551, Amy E. Lewis at +1 (312) 609 7837, or any other Vedder Price attorney with whom you have worked.

Vedder Price Shareholders discuss the practical and legal issues that employers should consider as they plan for the return to “normal” operations during the coronavirus pandemic.

 

Our 90-minute webinar will provide practical planning guidance on the following subjects:

Returning employees to work: WARN, EEO, wage/hour, employee benefit and collective bargaining issues.

How new COVID laws and regulations will affect workplace re-entry: ADA, FFCRA, Paycheck Protection Program, FMLA, state and local rules.

Managing employee anxiety and apprehension about returning to work.

Creating new workplace policies and protocols that maximize employee safety and productivity. 

We want to ensure our program meets your needs. When you RSVP, please let us know about the issues that are most relevant to you. 

CLE Credit Pending

Vedder Price is an accredited CLE provider in California, Illinois and New York and, when possible, a sponsor in Virginia.

Thank you for your interest in attending the 2020 Vedder Works Employment Roundtable at the Vedder Price London Office on 17 June 2020.

In light of concerns surrounding the potential spread of COVID-19 and the CDC’s guidance regarding social distancing, this event has been postponed and will not take place on 17 June. We will keep you updated on future events and look forward to connecting with you soon. 

CPD Credit

This program will be submitted for review, once our agenda is finalized.

 
To learn more about other 2020 Vedder Works seminars and webinars, please click here.